Assessing strategic options is at the heart of alliance management practice, especially in the negotiation processes. Game theory is the science of strategic decision-making, helping to streamline areas such as internal alignment meetings, steering committees, and alliance sub-committees. A new game theory workshop debuted front-and-center at the 2017 ASAP BioPharma Conference “Accelerating Life Science Collaborations: Better Partnering, Better Outcomes” at the Royal Sonesta Boston, Cambridge, Mass. on Sept. 13. “Strategic Decision Making & Negotiations: Learnings from Game Theory and AM Practice,” facilitated by Harm-Jan Borgeld, CSAP, and head of alliance management for Merck KGaA, and Stefanie Schubert, professor of economics at SRH University Heidelberg, guided participants through the playing field of game theory, providing insights on the speed and quality of decision-making practices. I spoke with the facilitators after the workshop about this fascinating topic and the practical applications for game theory.

Stefanie: Game theory can be applied to any kind of situation. The basic idea of game theory is that you try to put yourself in someone else’s shoes and figure out what they will do before you make your own decision. It helps you find the optimal decision. It requires that you think about the player—the people who have to make a decision—possible strategies, and assess possible outcomes.

Harm-Jan: Game theory helps you understand how people think. In our workshop, we used game theory to enhance the decision-making, negotiating, and influencing skills of the alliance manager. It also teaches how to prepare for a negotiation and facilitates discussions on out-of-the-box thinking.

Stefanie: Influencing benefits from creativity. There are plenty of uncreative ways to influence, such as signing a contract or delegating. But why not be creative? The workshop uses lots of real-life cases, games, and exercises. For example, we use a simple negotiation game where two participants share a real cake. One player divides the cake; the other accepts or does not accept the division. If it’s a cake, it’s common to split it down the middle. But if it’s money, a company will not do it. Game theory takes the position that everyone loves the cake and wants the biggest piece, and it is strategic to offer only a small piece. We use this game to discuss how to leverage negotiation power and discuss alternatives for optimal decisions.

Harm-Jan: The workshop is practical and uses video clips and exercises as teaching tools. We want participants to be able to use what they learn tomorrow. The cake actually is an analogy for dividing [assets]. It helps you understand how the other person makes decisions and prepares for disagreements. We also talked about how to build trust. There are certain ways to establish trust. One way is to always do what you say: Be predictable, engaged, and treat opponents as equals, and not engage senior management without agreeing beforehand. Most trust is created [and maintained] if not broken.

Stefanie: When applying game theory, you need to simplify. It’s an analytical framework: If you have to make a decision, the outcome depends on the action of someone else. Central to game theory is the question: What is optimal for me to do if the outcome depends on the other party’s action? And it works in every culture or environment.